| RAS AL-KHAIR, Saudi Arabia
RAS AL-KHAIR, Saudi Arabia Nov 29 Saudi
Arabia's King Salman underlined the kingdom's intention to
invest heavily in speeding up is diversification away from oil
exports with the inauguration on Tuesday of a $35 billion mining
and minerals processing complex.
Riyadh has tried to reduce the economy's reliance on oil for
decades, but the challenge has become particularly urgent in the
past couple of years as low prices have pushed state finances
deep into deficit and growth has slowed sharply.
King Salman and his top ministers visited the complex at Ras
al-Khair on Saudi Arabia's eastern coast, where energy minister
Khalid al-Falih said the government would invest in all
available resources to develop strategic industries.
The vast complex showcases the government's ability to use
its oil wealth to push big industrial projects, but also shows
how dependent the economy remains on state spending in the
absence of a dynamic private sector. Most of the $35 billion
invested so far was arranged by the government.
Projects include a $5.6 billion phosphate complex which
produces fertiliser and chemicals and is operated by Saudi
Arabian Mining Co (Ma'aden) in partnership with
petrochemical giant Saudi Basic Industries Corp (SABIC)
; both companies are majority state-owned.
A $10.8 billion aluminium facility is operated by Ma'aden
and U.S. firm Alcoa, while the complex also features a
1,400 kilometre (875 mile) railway link, a port, and
desalination and power plants.
Economic reform plans announced earlier this year aim to
expand the mining sector's contribution to gross domestic
product to 240 billion riyals ($64 billion) by 2030 from 64
billion riyals at present.
"Jubail was where the Saudi petrochemicals industry started
with SABIC - Ras al-Khair is becoming just that for the mining
industry," said Fadl al-Bouainain, a prominent Saudi economist.
With its spending constrained by low oil prices, however,
the government concedes it will have to rely more in future on
private sector investment by local and foreign firms, and it has
not yet fully made clear how it hopes to attract that money.
"The key question Saudi Arabia will need to answer is how
quickly they want to develop the mining sector, how much they
want foreign investors to participate, and the risks and rewards
they would offer to investors and retain for the government,"
said Paul Robinson, director at mining consultancy CRU Group.
One of the next big projects planned for Ras al-Khair is the
construction of a huge ship repair and shipbuilding complex
costing over 20 billion riyals; construction is to start in 2018
and commercial operations in 2022.
State oil giant Saudi Aramco IPO-ARMO.SE is leading the
project, which is to provide engineering, manufacturing and
repair services for offshore rigs and commercial vessels - work
that until now has largely been done outside the kingdom.
The project may face heavy competition from existing
shipbuilding centres in South Korea and elsewhere, but Aramco
estimates that it will create 80,000 jobs directly and
indirectly while allowing Saudi Arabia to reduce its imports by
$12 billion annually.
(Additional reporting by Marwa Rashad; Writing by Andrew
Torchia; Editing by Alexander Smith)